IMA calls for FSA to remove RDR Mifid conflicts
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The IMA has urged the FSA and the EC to align their stances on commission and rebates to remove conflicts between the RDR and the Markets in Financial Instruments Directive (Mifid).
Guy Sears, director of wholesale at the fund management trade body, said that while the new version of Mifid was due to stop ‘independent’ advisers accepting commission from product providers, the proposals relied on too vague a definition of ‘independent’ advice, which would have little impact on the continent.
By contrast, the RDR will ban all UK advisers - independent or not - from accepting commission from product providers. The FSA says it has ensured the RDR will not be altered by the new version of Mifid, but some experts fear the RDR may lose its ‘gold-plated’ status.
In written evidence submitted to a House of Lords committee scrutinising the Mifid proposals, Mr Sears said: “The RDR bans commissions paid to any form of advisers [while] the Mifid proposals relate to ‘independent’ advisers only and there is no proper definition of independent or non-independent.
“Our European industry colleagues comment that no continental advisers will call themselves independent, and the ban as drafted will therefore have no real effect in practice.”
The IMA has instead proposed requiring all product providers to disclose how much they receive in charges “at least annually”, and all “non-advisory distributors” to disclose all commissions. Advisers should be banned from receiving commission regardless of independent status, the IMA added.
Mr Sears also warned the EC had made no moves to ban rebates to end investors - advisers’ clients. The FSA has outlined its intention to ban all kickbacks from products or investment platforms to consumers but has yet to issue final rules. The IMA is against such a ban and called for the Commission to make explicit that rebates can be paid to an investor’s account.
In addition, Mr Sears said Mifid did not mention platforms and most EU member states “do not comprehend” them as a type of distributor, meaning platforms were unlikely to be accounted for in European rules.
The IMA is the latest party to warn of conflicts between the RDR and Mifid in spite of the FSA’s belief that it will not be overruled by Europe.
Following its finalised guidance on independent and restricted advice released on June 6 the regulator said its approach “is compatible with the proposals being debated”, adding that it would consider any further action when the Mifid proposals are finalised.
Speaking at a PanaceaIFA event last month, Richard Hobbs, head of regulatory consulting at Lansons, said the FSA could attempt a “carve-out” in future but was by no means assured of an exemption from any clashes with Mifid.